In a landmark 1964 case, the U.S. Supreme Court reversed the obscenity conviction of an Ohio theater owner who had screened the French film “Les Amants.” In his concurring opinion, Justice Potter Stevens concluded that while he was unable to provide a precise definition of hard-core pornography, he knew it when he saw it. So [...]

Do you feel hamstrung by your company’s IT policies? Are the IT tools you have at home more up-to-date than ones you’re forced to use at work? Do you wish you had more control over your IT environment at work? If so, you’re not alone.

In his recent piece for the Wall Street Journal, Nick Wingfield dared to question the totalitarian policies of the average corporate IT department–and boy-oh-boy does he make some good points.

How is it that employees can be trusted to take care of important customers, safeguard expensive equipment and stay within their budgets, but can’t be trusted to use the Web at work, choose their own IT tools, or download programs onto the workplace PCs? Do IT staffers really believe that conscientious, committed employees turn into crazed, malicious hackers when you give them a bit of freedom over their IT environment? Or are the nerds in IT all secret control freaks—the sort of folks who alphabetize their DVD collections and have separate drawers for different-colored socks and put on protective clothing before pounding a nail? Either way, if they had the budget, they’d probably hire hall monitors.

In my last posting, I summarized the first half of my next, never-to-be-published, book. Herewith, the second half, again in digest form.
Chapter 4: Strategic flexibility.Nimble and quick beats big and beefy.
A. Disaggregate the organization. Big things aren’t nimble. That’s why there aren’t any 200-pound gymnasts or jumbo-sized fighter jets. It’s also why Gore & Associates, the manufacturer of Gore-Tex and 1,000 other high-tech products, limits its operating units to no more than 200 individuals. In a company comprised of a few, large organizational units, there tends to be a lack of intellectual diversity—since people within the same unit tend to think alike. Within any single organizational unit, a dominant set of business assumptions is likely to emerge over time. One way of counteracting the homogenizing effects of this groupthink is to break big units into little ones. Big units also tend to have more management layers—which makes it more difficult to get new ideas through the approval gauntlet. In addition, elephantine organizations tend to erode personal accountability. An employee who’s one of hundreds, rather than one of a few, is unlikely to feel personally responsible for helping the organization adapt and change. (Surely, that’s somebody’s job “up there.”) For all these reasons, small, differentiated, units are a boon to adaptability. Most executives overweight the advantages of scale and underweight the advantages of flexibility—hence the enduring and often perverse managerial preference for combining small units into big ones—a preference that all too often turns lithe acrobats into lumbering giants.
B. Create real competition for resources. Businesses fail when they over-invest in what is at the expense of what could be. This happens because in most companies, well-established businesses have a distinct advantage in attracting resources. Managers trying to launch new initiatives are usually at a profound disadvantage when it comes to competing for talent and capital. In a bureaucracy, personal power is a function of the resources one controls. That’s why managers are invariably reluctant to give up headcount and cash, even when those resources might be more profitably employed elsewhere in the organization. In addition, the funding criteria for new projects tends to be highly conservative. This makes sense when making large investments in the core business, where the prudent use of data and experience can mitigate risk, but is just plain dumb for small, exploratory investments in new areas. In practice, existing businesses tend to enjoy a kind of “squatter’s rights”—only a small percentage of their budget and head count is “up for grabs” each year in the budgeting cycle.

I don’t know if I’ll write another book. Truth is, I’m too busy right now—and even if I found the time to churn one out, you’d probably be too busy to read it. After all, how many business books have you managed to read this year, cover to cover? According to my friends at Harvard Business School publishing, about 22 million business books were sold in 2008. If we assume the market for such books comprises 20% of the US population, or 62 million people, that means that each potential customer bought roughly 1/3 of a book last year. There are roughly 2,000 business books published each year, so the probability that you would buy my new book is roughly .35/2000 or .0175%, and the chance you’ll actually read it a fraction of that. So why bother?

I’m looking at my own bookshelf. It’s not huge. I’m not one of those professors whose office is encased floor-to-ceiling with books. By the way, I think academics do this to intimidate their visitors. The message: See all these books? I’ve read every last one and that makes me so much smarter than you. Nonsense! Eggheads don’t have time to read a lot of books, either. I doubt I’ve read more than 10% of the 500+ books in my office. I get sent a lot of books, and every few months I clear out all the books I know I’m never going to read and donate them to the local library—I’m sure there’s someone out there who is dying to read “The Five Dysfunctions of a Team.”

Not that my temporary vow of book-writing abstinence is likely to rob you of any incisive insights. Truth is, the average business book is just a Harvard Business Review article with extra examples, and the average HBR article is a good PowerPoint presentation with extra prose. So I figured I could cut to the chase and just give you the CliffsNotes version of my never-to-be-published book.

There’s probably no organizational attribute that’s more important today than adaptability. In our topsy turvy world, every organization is teetering on the brink of irrelevance, and unless it can change as fast as change itself, it will soon tumble off the ledge.

In most organizations, change comes in only two flavors: trivial and traumatic. Review the history of the average organization and you’ll discover long periods of incremental fiddling punctuated by occasional bouts of frantic, crisis-driven, change. The dynamic is not unlike that of arteriosclerosis: after years of relative inactivity, the slow accretion of arterial plaque is suddenly revealed by the business equivalent of a myocardial infarction. The only option at that juncture is a quadruple bypass: excise the leadership team, slash head count, dump “non-core” assets and overhaul the balance sheet.

Why does change have to happen this way? Why does a company have to frustrate its shareholders, infuriate its customers and squander much of its legacy before it can reinvent itself? It’s easy to blame leaders who’ve fallen prey to denial and nostalgia, but the problem goes deeper than that. Organizations by their very nature are inertial. Like a fast-spinning gyroscope that can’t be easily unbalanced, successful organizations spin around the axis of unshakeable beliefs and well-rehearsed routines—and it typically takes a dramatic outside force to destabilize the self-reinforcing system of policies and practices.

“What’s wrong with organized religion?” That’s the question I addressed at a recent conference organized by Willow Creek Community Church in Barrington, Illinois. For nearly 30 years, Willow Creek has been one of America’s most progressive churches, and since 1999 it’s been running an annual a seminar for church leaders from around the world. The “Leadership Summit” features innovative pastors as well as non-church speakers. This year’s roster included Carly Fiorina, Bono, Tony Blair, Jessica Jackley, co-founder of Kiva, and a slightly nerdish business school professor.

So there I was, in front of 7,000 preachers and laymen, with another 60,000 or so by satellite. I’m used to flashing my PowerPoints in front people who are richer, smarter and more powerful than me. But this was the first time I had to face a stadium’s worth of folks who were probably more virtuous than me. It wasn’t so much a case of Daniel in the lion’s den as Gary in the Christians’ den. (By the way, I donated my small honorarium to charity).

Obviously, no one dragged me on stage in chains. I went for two reasons. First, I believe that religious institutions, like other sorts of organizations, need a management reboot, and I know a little bit about how to make this happen. My hypothesis: the problem with organized religion isn’t that it’s too religious, but that it’s too organized. And second, I believe that the “church” (in the broadest, ecumenical sense of the word) plays an essential role in constructing the moral foundations of a democratic society—a view advanced 147 years ago by that famous French tourist, Alexis de Tocqueville:

In a recent post I promised that I’d lay out a blueprint for building a company that’s as nimble as change itself—and I will, but first I’d like to share an anecdote about a simple experiment in workplace freedom.

In most organizations, the decision-making freedoms of frontline employees are highly circumscribed. Sales reps, call center staff, office managers, and assembly line workers are usually trussed up in tangle of top-down policies, “best practices,” and standard operating procedures. Yet it’s impossible to build a highly adaptable organization without first expanding the scope of employee freedom. To create an organization that’s adaptable and innovative, people need the freedom to challenge precedent, to “waste” time, to go outside of channels, to experiment, to take risks and to follow their passions.

Interestingly, humanity’s most adaptable social system—democracies and markets—are those that extend the greatest freedom to their constituents. In a democracy, you don’t need anyone’s permission to form a new political party, publish a politically charged article, or organize a “tea party.” And in open markets, individuals are free to buy and invest as they see fit. When compared to the typical corporate leviathan, these systems are remarkably under-managed.

In most languages, “control” is the first synonym for the word “manage.” Control is about spotting and correcting deviations from pre-defined standards; thus to control one must first constrain. Standards, policies and rules are important—no organization can exist or survive without them. The problem, though, is that managers (and public sector bureaucrats) are incentivized to enlarge, rather than reduce, the scope of their regulatory powers. More rules mean more things to control, which in turn means more job security and more power. The impetus to control works like a ratchet—as the years pass, the number of rules and regulations steadily increase. That’s why older organizations are usually more sclerotic than young ones—over time once flexible minds and muscles become slowly encased in a hard carapace of rules and regulations.

Imagine, then, the controls you might find in an organization that will soon celebrate its 150th birthday, a venerable institution like, say, the Bank of New Zealand. BNZ is the 148-year old subsidiary of National Australia Bank, but strangely enough it’s also a case study in the power empowerment.

To the question, “can an organization die an untimely death,” an economist would answer “no.” Institutions die when they deserve to die, that is, when they have shown themselves perpetually incapable of fulfilling stakeholder demands.

Yet this crude tautology conceals a more subtle point. Institutions are seldom murdered; usually, they commit suicide (with politicians sometimes cast in the role of Dr. Kevorkian). But just as a suicide can be untimely, so too can corporate death—at least from the perspective of society at large.

Time enables complexity. It took millions of years for evolution to produce the mammalian eye and, eventually, the human brain. If a meteor had destroyed life on Earth in the millennia preceding the Cambrian explosion, the possibility of human reason would have been aborted. Whether anything would have been “lost” by such a catastrophe is a metaphysical question, but the point becomes quite practical when we veer back to the world of organizations.

Organizations grow and prosper by turning simple ideas into complex systems—from the idea of mobility for the masses we got Ford Motor Company, and from the notion of Internet search, Google. Yet the process of turning inspiration into value takes time, proceeding as it does through iterative cycles of experiment-learn-select-and-codify. If a poor executive decision prematurely interrupts this process, a society may lose the benefit of the original idea, if only for the period of time in which it takes another organization to pluck the idea from the ashes of the failed pioneer.

At the end of my last post I posed a couple of questions: In a dynamic economy, is there any reason to care whether a particular company lives or dies? Or to put it another way, does organizational longevity have any intrinsic value—for shareholders, employees, customers or society at large?

If you’re a venture capitalist, a classically trained economist or an emotional zombie, you’re likely to answer “no.” I get that. In a market economy there are several mechanisms that make it difficult for a company to persistently misuse society’s resources. Highly competitive product markets, a healthy entrepreneurial sector, a market for corporate control and the threat of bankruptcy — these are the things that protect customers and shareholders from unremitting managerial incompetence. When these insurance policies are in place, a corporation that fails to adapt to changing circumstances will loose its customers, its best employees, and ultimately, its independence. That’s what happened to Sun Microsystems, the once-revolutionary company that recently ceded its sovereignty to Oracle. Given this, it doesn’t matter whether an individual company is resilient, it matters only that the economy is. This view has the benefit of being neat and simple, but on several counts it’s also simple-minded.

In two recent blogs I outlined four reasons why flourishing companies often falter: change happens, gravity wins, strategies die and success corrupts. To these let me add a fifth failure factor: catastrophes strike. Occasionally it really isn’t management’s fault—poop happens. For example, it would be unfair to blame Toyota’s management team for the entirety of the firm’s recent $21.8 billion reversal in earnings (from FY08 to FY09). Likewise, executives at Southwest Airlines deserve at least a tear of sympathy for the brass-knuckled battering their company has received in the recent recession.

By itself, an externally-generated calamity is seldom enough to kill off a successful business; though a bout of seriously bad luck can deliver the coup de grâce to a company that was already on its knees.

But should we care when a company struggles or dies? Isn’t birth, growth and death the natural order of things—to be expected in organizational life just as it is in human life? Isn’t the cycle of beginnings and endings a good thing? Even a recession has it uses. Like a forest fire in an over-protected wilderness, it clears out sickly trees and gives new saplings room to grow. So while organizational failure is inconvenient for those involved (after the forest fire, campers will have to roast their marshmallows somewhere else), is it, well, a catastrophe?

About Gary Hamel's Management 2.0

Gary Hamel is a management author and consultant. His books include “Leading the Revolution,” “Competing for the Future,” and “The Future of Management.” He’s a visiting professor at London Business School and director of the Management Lab.